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21–629 PDF 2005

THE ADMINISTRATION’S STRENGTHENING AMERICA’S COMMUNITIES

INITIATIVE AND ITS IMPACT ON

ECONOMIC DEVELOPMENT

(109–8)

HEARING

BEFORE THE

SUBCOMMITTEE ON

ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS AND

EMERGENCY MANAGEMENT

OF THE

COMMITTEE ON

TRANSPORTATION AND

INFRASTRUCTURE

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

MARCH 17, 2005

Printed for the use of the

Committee on Transportation and Infrastructure

(
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-Chair

SHERWOOD L. BOEHLERT, New York

HOWARD COBLE, North Carolina

JOHN J. DUNCAN, JR., Tennessee

WAYNE T. GILCHREST, Maryland

JOHN L. MICA, Florida

PETER HOEKSTRA, Michigan

VERNON J. EHLERS, Michigan

SPENCER BACHUS, Alabama

STEVEN C. LATOURETTE, Ohio

SUE W. KELLY, New York

RICHARD H. BAKER, Louisiana

ROBERT W. NEY, Ohio

FRANK A. LOBIONDO, New Jersey

JERRY MORAN, Kansas

GARY G. MILLER, California

ROBIN HAYES, North Carolina

ROB SIMMONS, Connecticut

HENRY E. BROWN, JR., South Carolina

TIMOTHY V. JOHNSON, Illinois

TODD RUSSELL PLATTS, Pennsylvania

SAM GRAVES, Missouri

MARK R. KENNEDY, Minnesota

BILL SHUSTER, Pennsylvania

JOHN BOOZMAN, Arkansas

JIM GERLACH, Pennsylvania

MARIO DIAZ-BALART, Florida

JON C. PORTER, Nevada

TOM OSBORNE, Nebraska

KENNY MARCHANT, Texas

MICHAEL E. SODREL, Indiana

CHARLES W. DENT, Pennsylvania

TED POE, Texas

DAVID G. REICHERT, Washington

CONNIE MACK, Florida

JOHN R. ‘RANDY’ KUHL, JR., New York

LUIS G. FORTUN ̃ O, Puerto Rico

LYNN A. WESTMORELAND, Georgia

CHARLES W. BOUSTANY, JR., Louisiana

VACANCY

JAMES L. OBERSTAR, Minnesota

NICK J. RAHALL, II, West Virginia

PETER A. DEFAZIO, Oregon

JERRY F. COSTELLO, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JERROLD NADLER, New York

ROBERT MENENDEZ, New Jersey

CORRINE BROWN, Florida

BOB FILNER, California

EDDIE BERNICE JOHNSON, Texas

GENE TAYLOR, Mississippi

JUANITA MILLENDER-MCDONALD,

California

ELIJAH E. CUMMINGS, Maryland

EARL BLUMENAUER, Oregon

ELLEN O. TAUSCHER, California

BILL PASCRELL, JR., New Jersey

LEONARD L. BOSWELL, Iowa

TIM HOLDEN, Pennsylvania

BRIAN BAIRD, Washington

SHELLEY BERKLEY, Nevada

JIM MATHESON, Utah

MICHAEL M. HONDA, California

RICK LARSEN, Washington

MICHAEL E. CAPUANO, Massachusetts

ANTHONY D. WEINER, New York

JULIA CARSON, Indiana

TIMOTHY H. BISHOP, New York

MICHAEL H. MICHAUD, Maine

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

BRIAN HIGGINS, New York

RUSS CARNAHAN, Missouri

ALLYSON Y. SCHWARTZ, Pennsylvania

JOHN T. SALAZAR, Colorado

(II)
SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS AND EMERGENCY

MANAGEMENT

BILL SHUSTER, Pennsylvania, Chairman

JIM GERLACH, Pennsylvania

KENNY MARCHANT, Texas, Vice-Chair

CHARLES W. DENT, Pennsylvania

JOHN R. ‘RANDY’ KUHL, JR., New York

DON YOUNG, Alaska

(Ex Officio)

ELEANOR HOLMES NORTON, District of

Columbia

MICHAEL H. MICHAUD, Maine

LINCOLN DAVIS, Tennessee

JULIA CARSON, Indiana

JAMES L. OBERSTAR, Minnesota

(Ex Officio)

(III)

CONTENTS

TESTIMONY

Page

Anspach, Hon. Robert A., Mayor, Lebanon, Pennsylvania ................................... 18

Fluharty, Charles, Director, Rural Policy Research Institute, University of

Missouri ................................................................................................................ 18

Jones, Ken, First Vice-President, National Association of Development Organizations, Executive Director, Lower Rio Grande Valley Development Council ........................................................................................................................... 18

Sampson, Hon. David A., Assistant Secretary of Commerce for Economic

Development ......................................................................................................... 5

Silvetti, Edward M., Executive Director, Southern Alleghenies Planning and

Development Commission ................................................................................... 18

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Blumenauer, Hon. Earl, of Oregon ......................................................................... 50

Kuhl, Hon. John R. ′′Randy′′, Jr., of New York ..................................................... 81

LoBiondo, Hon. Frank A., of New Jersey .............................................................. 83

Michaud, Hon. Michael H., of Maine ..................................................................... 85

Norton, Hon. Eleanor Holmes, of the District of Columbia ................................. 88

Oberstar, Hon. James L., of Minnesota ................................................................. 90

PREPARED STATEMENTS SUBMITTED BY WITNESSES

Anspach, Hon. Robert A .......................................................................................... 32

Fluharty, Charles .................................................................................................... 52

Jones, Ken ................................................................................................................ 64

Sampson, Hon. David A .......................................................................................... 94

Silvetti, Edward M .................................................................................................. 118

SUBMISSIONS FOR THE RECORD

Anspach, Hon. Robert A., Mayor, Lebanon, Pennsylvania, responses to questions ....................................................................................................................... 40

Jones, Ken, First Vice-President, National Association of Development Organizations, Executive Director, Lower Rio Grande Valley Development Council, responses to questions ................................................................................... 77

Sampson, Hon. David A., Assistant Secretary of Commerce for Economic

Development, responses to questions ................................................................. 109

ADDITIONS TO THE RECORD

American Planning Associaiton, letter, March 15, 2005 ...................................... 124

City of Atlanta, Rhonda Dauphin Johnson, Atlanta Municipal Clerk ................ 125

National Association of Regional Councils, Robert Sokolowski, Executive Director, statement .................................................................................................. 129

(1)

THE ADMINISTRATION’S STRENGTHENING

AMERICA’S COMMUNITIES INITIATIVE AND

ITS IMPACT ON ECONOMIC DEVELOPMENT

Thursday, March 17, 2005

HOUSE OF REPRESENTATIVES, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS AND EMERGENCY MANAGEMENT, WASHINGTON, D.C.

The subcommittee met, pursuant to call, at 2:03 p.m., in Room

2167, Rayburn House Office Building, Hon. Bill Shuster presiding.

Mr. SHUSTER. The Subcommittee will come to order. I am glad

to see we have a nice crowd here today. This is my first subcommittee hearing, and I didn’t realize there would be so much media attention out in the hall. So I will be a little bit nervous when I walk

out of here. I have been accused of being on steroids, but that is

not the case.

Before we begin today’s hearing, I would like to take a moment

to welcome the members of the Subcommittee, and the several

freshman members welcome them to Congress. I expect this Congress to be very busy with several important issues having arisen

and, of course, our normal workload that we have, and I hope we

can be as productive in the coming Congress as the Subcommittee

has been in the previous years.

I would also like to say I look forward to working with the Ranking Member, Mrs. Norton. Together I believe we will be able to aggressively advance a bipartisan agenda that realizes the greatest

benefits for the American people, while at the same time protecting

this committee’s jurisdiction.

I would also like to welcome the chairman of our Coast Guard

Committee. I thought I saw him in. Okay, I won’t welcome him,

then, until later.

I would ask unanimous consent, if Mr. LoBiondo comes today,

which we expect him to, that he be able to sit with the Committee

and ask questions of our witnesses. Without objection, so ordered.

This is a very important issue to our Committee, with far-reaching impacts both in our jurisdiction and the substantive subject

matter. As such, I would ask unanimous consent that the chairman

and the ranking chairman of the full committee be allowed extend

their opening remarks to 10 minutes if they so desire. Without objection, that is so ordered.

With that, I would now like to turn to the topic of today’s hearing, that being the Administration’s Strengthening America’s Communities initiative and its impact on economic development.
2

In advance of its fiscal year 2006 budget, the Administration announced a sweeping reform of the Federal Government’s economic

and community development efforts entitled ‘‘Strengthening America’s Communities.’’ This new program, which will be housed at the

Department of Commerce, would consolidate programs from across

five departments and agencies into a new grant program that includes block grants, incentive grants, and opportunity zones.

The Administration has given four primary goals for this effort:

first, to better focus resources on those communities most in need;

second, to provide greater flexibility to recipients; third, to implement new performance and accountability measures; and, fourth, to

eliminate under-performing and duplicative programs.

I applaud these goals, since it seems to me that the worst thing

we can do is remained locked into an existing way of thinking that

does not recognize the fact that since many of these programs were

created, the economy and the world has changed, so our Federal

programs would change with them. However, we must change the

way we think about economic development to stay current with the

economy and the world. That does not mean that we should abandon proven means of economic development.

Since its creation, this committee has focused on improving the

Nation’s infrastructure. We do this not just because we like to build

roads, bridges, airports, and water systems; we believe, and history

has borne this out, that economic development will only occur in

those places where there exists safe and stable infrastructure.

If we were to look at satellite pictures of the United States at

night, we would see, of course, bright lights emanating from our

large population centers. But even more important and instructive

for this debate is to look at what connects those bright spots. It is

slightly less bright spots arranged in neat lines, crisscrossing the

Country. These lines almost exactly track the interstate highway

system. And if we were to zoom in on those bright spots, we would

see development along State highways and rail lines and surrounding airports, because while we like to talk about being an interconnected global economy, that connection begins with access roads

to an industrial or business park.

While infrastructure is fundamental to economic development,

that is, it is equally fundamental and is something that we must

allow for in whatever proposal moves forward, is consistent funding

for economic development planning. While I applaud the notion of

awarding monies competitively and to reward success, we must ensure that we are not creating a permanent underclass of communities that cannot compete because they do not have the resources

to develop integrated economic development plans.

For this new program to succeed, it is going to have to be built

on the basis of a successful model. If we are interested in finding

out exactly what it takes to ensure a successful economic development program, we need to go no further than the Economic Development Administration, which has achieved success both programmatically and organizationally.

In fiscal year 2003 alone, EDA’s projects leveraged an average of

$22 per every Federal dollar invested and created 88,000 jobs. This

is programmatic success. But EDA should also be the basis model

for the administration of the new program. After all, according to
3

the Office of Management and Budget’s own performance ratings,

EDA was one of only two agencies to receive a ‘‘moderately effective’’ rating, the second highest score. And the only thing that kept

it from receiving the highest score was the duplicative activities of

other agencies’ programs.

These are just a few of the very important issues I hope to address at today’s hearing. I know that, as a committee, there has

been a lot of interest expressed about this very significant program

change, and as a committee with a significant role in economic development, we plan to remain actively involved as this proposal

moves forward.

I look forward to working with the Administration and all interested members in drafting legislation on this groundbreaking initiative.

We have a wonderful lineup of witnesses that I hope we will be

able to provide firsthand knowledge of the proposal itself, its basic

rationale, as well as some perspective of the impact it would have,

as well as factors that we should keep in mind as we go forward

in discussing this proposal.

I would especially like to welcome Assistant Secretary Sampson,

who will be appearing on our first panel this afternoon. Secretary

Sampson I believe has been a very productive leader at EDA, and

I thank him for that leadership. The agency has reoriented itself

to more effectively meet the challenges of the twenty-first century

economy, while at the same time dealing with difficult budgetary

limitations. Finally, during the 108th Congress, his efforts were an

integral part of the reauthorization of EDA.

With that, I would like to recognize our Ranking Member, Mrs.

Norton, from the District of Columbia for her opening statement.

Ms. NORTON. Thank you very much, Chairman Shuster. I am delighted to join you today for our first meeting, and I am particularly pleased that you have focused the Subcommittee on the issue

of economic development. As a member of this Subcommittee for 15

years, who knows you and your work in the House, I am especially

pleased that you have become Chair of this Subcommittee. As you

know, this committee and subcommittee have a rich history of bipartisanship. We have benefitted from a long line of chairs like

yourself who have worked to ensure that all members and their

ideas are included for consideration and dialogue, and that our

policies and programs benefit all parts of the Country.

Precisely because of our bipartisan tradition, I am concerned that

in the President’s budget proposal for fiscal year 2006 the Administration is proposing an approach that undercuts these productive

roles. The Administration proposes to consolidate 18 economic development programs into one program to be housed in the Department of Commerce. Further, the Administration is proposing to reduce funding for these programs by almost $2 billion. My greatest

concern is that the Office of Management and Budget apparently

selected these programs without fully analyzing the impact on distressed and under-served communities.

Of longstanding and special interest to this Subcommittee has

been our jurisdiction over the programs of the Economic Development Administration, which is an agency inside the Department of

Commerce. This subcommittee has played a pivotal role in making
4

these programs what are regarded today as among the best and

most productive in the Federal sector. Barely six months ago, this

Subcommittee held hearings and worked with the Senate and the

Administration to pass S. 1134 into law, which reauthorized appropriations for EDA for five years. Now it appears that the Administration wants to head off in a totally different direction and do

away with an agency that it has just praised as particularly effective and efficient. I am eager to hear from Dr. Sampson to learn

what accounts for this U-turn regarding EDA, and to hear the details of the Administration’s plan.

As always, I am pleased to have witnesses from across the Country who actually work with economic development districts and, according to the documented record of our hearings and the investigation of our Subcommittee, have done an exceptional job.

Thank you, Chairman Shuster, for calling this hearing. I look

forward to working with you as we work through this and other

initiatives this session. Thank you, Mr. Chairman.

Mr. SHUSTER. Thank you, Ms. Norton. I appreciate those kind

words.

I would now like to recognize Mr. Dent for a brief opening statement.

Mr. DENT. Thank you, Mr. Chairman.

Mr. Sampson, good afternoon.

Mr. SAMPSON. Good to see you again.

Mr. DENT. I have obviously met with you before on this issue, on

the Government Reform Committee Subcommittee on Federalism

and the Census, and I guess my message today is the same as it

was the other day. It would have been helpful if some more of the

stakeholders were engaged in this process, particularly in our

urban area. As I mentioned before, you have made a strong case,

I believe, perhaps to move some of these programs over into Commerce, particularly brownfields and enterprise zones. I think one

can make a logical argument that they ought to be over in Commerce. But CDBGs, CSBG and some of the other programs I really

believe it is incumbent for the Administration to come back to us

at some point with some strong input from those stakeholders, try

to engage them in this process.

In my State, we had done something similar, where we had

merged basically our community department—it is called Partner

Community Affairs—with our Department of Commerce and made

one big Department of Community and Economic Development. It

worked out rather well, but we had engaged the stakeholders in

this process. And at least with respect to some of these programs

I don’t think that case has yet been made, and I would just look

forward to hearing some more from your department as we move

along in this budget process.

Thank you.

Mr. SHUSTER. I would now like to recognize Mr. Michaud.

Mr. MICHAUD. Thank you very much, Mr. Chairman. I want to,

first of all, congratulate you on assuming the chairmanship of this

committee, and I have great confidence in your leadership. You are

working with an extraordinary ranking member, Ms. Norton, and

I know that we will have a productive and valuable session together.
5

I will close and would ask unanimous consent to have my opening remarks submitted for the record so we can proceed with the

hearing.

But I do want to say that I appreciate Dr. Sampson’s presence

here today. Dr. Sampson, actually earlier in the week, yesterday

told me that the Administration wants to work with Congress to

be a full partner in this effort to help shape the future of our economic development programs. I appreciate this cooperation and

flexibility, and I personally value Dr. Sampson’s candor and openness and willingness to work with the Committee to help craft a

program that will truly help our communities all across the Country. So thank you for coming here today.

And with that, Mr. Chairman, I would ask unanimous consent to

have my remarks placed in the record.

Mr. SHUSTER. Without objection, so ordered.

I ask unanimous consent that all of our witnesses’ full statements be included in the record today. Without objection, that is

so ordered.

And since your written testimony has been part of the record, the

Subcommittee would request that you limit your opening statement

to five minutes.

I would also encourage members of the Committee—I am going

to try to enforce the five minute rule. On so many committees on

the Hill here we go over that, so I am going to be a stickler on it.

That is one reason I wanted to give Mrs. Norton and Mr. Oberstar,

and if Mr. Young were here, extra time to open up.

We have two panels today of witnesses. Our first panel we have

only one witness, Dr. David Sampson, the Assistant Secretary of

Commerce for Economic Development, who will represent the Administration’s perspective as the person leading this initiative.

Dr. Sampson, thank you for being here, and proceed.

STATEMENT OF THE HONORABLE DAVID A. SAMPSON, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT

Mr. SAMPSON. Mr. Chairman, thank you. Ranking Member Norton, good to be back with you again.

Let me say I am pleased to have the opportunity to discuss the

President’s Strengthening America’s Communities initiative with

you, and what I want to do is briefly highlight the underlying principles behind the initiative, explain why we need substantial reform, and, finally, articulate the main points of the initiative.

While America’s economy is strong and getting stronger, everyone recognizes that that economic strength is not felt equally

throughout the Nation. As members of this committee are certainly

well aware, in low-income communities and in communities where

traditional industries do not employ as many people as they did a

generation ago, opportunity can appear to be far out of reach. And

the President believes that these communities can make the transition to vibrant, strong economies and communities because of the

entrepreneurial spirit of the people who live there, and he also believes that the Federal Government has an important role to play.

He believes that the role of Federal Government in its economic

and community development programs should be to create the fun-
6

damental conditions for economic growth and the creation of more

and better jobs and viable communities, and thereby reduce a community’s reliance on perpetual Federal assistance.

In terms of why we need reform, in total, the Federal Government currently administers 35 different programs spread across

seven different cabinet agencies. These programs have a high degree of overlap and duplication, little coordination among them.

They have weak accountability measures and, according to the

OMB PART analysis, many of them simply cannot demonstrate

that after a history of 30 to 40 years, they have made a meaningful

contribution to improving or achieving community and economic

development goals.

We seek to greatly simplify access to the Federal system by consolidating 18 of these programs into a single unified grant program

budgeted at $3.71 billion in the President’s budget request. The

grant program will have two components. The first is a formulabased grant program, which would represent the bulk of the $3.71

billion. The formula would be based on factors such as levels of

poverty, disinvestment, unemployment rates, to ensure that the

most distressed communities in America have access to these

funds. The second component is the Economic Development Challenge Fund, which is designed to be a bonus program modeled after

the Millennium Challenge Account, that would reward those communities where there is strong business and elected leadership and

community leadership to actually improve the economic performance and remove barriers to growth.

Clearly, we recognize that there is a lot of work ahead of us with

regard to implementing this initiative. The President very intentionally submitted this as a proposal in his budget. We are thankful to have the opportunity to work with Congress before the Administration submits specific legislation. We are also creating a

Secretarial Advisory Committee to advise the Administration on

critical components of the legislation before it is submitted to Congress.

And with that, Mr. Chairman, I will conclude my summary remarks, and I would be happy to respond to your questions, as well

as that of the Committee.

Mr. SHUSTER. Thank you very much, Dr. Sampson. You and I

have had the discussion and I have expressed my concern to you

that setting up a new agency, for all intents and purposes brand

new, although you are bringing in other agencies from different

parts of the administration, my great concern is that we are setting

up something that is brand new and that we have seen from Homeland Security, the TSA, that that brings with it problems, trying

to bring these bureaucracies together. The one thing that I recommended to you is we use the EDA as the model and let everything fall into that.

But another question I have is I know there is duplication and

there is a lot of overlap in these programs. Did we think about, instead of consolidating to this huge new program, maybe looking at

them individually smaller and taking out the duplication and

streamlining them without bringing them all together?

Mr. SAMPSON. Let me respond to that on several levels.
7

While certainly there are lessons to be learned from the creation

of the Homeland Security Department, there are critical and fundamental differences between this proposal and that. While that

was putting together different agencies that maintained their own

distinct identities, this proposal consolidates funding from 18 different agencies. It would remove the individual stovepipe of funding among these different agencies, and those statutory authorities

will disappear and reside in the one new agency as a fundamentally new creation. That program will have broad flexibility, in fact,

much more flexibility than EDA currently has under its statutory

authority. It would be fundamentally a block grant program, where

these funds are block-granted to States and communities, as opposed to communities and States having to approach EDA for individual approval of every single project. So we believe that that is

a fundamental difference that calls for the creation of this new entity within Commerce.

Now, in reality, we believe that trying to solve the systemic problems on a piecemeal or case-by-case basis is really not an optimal

or a workable solution; it would require 18 different legislative

fixes and is, we believe, wholly inadequate to be able to solve the

systemic problems that we currently face. At the end of the day,

the Administration wants to work with Congress on the best strategy to fundamentally overhaul this current hodgepodge of programs and to pass legislation that fundamentally improves assistance to our neediest communities in America.

Mr. SHUSTER. Again, I don’t want to belabor the point, but as we

move forward on this, I believe we will take close and pay close attention to what is set up, because I think we had the same idea

with Homeland Security. And you bring the different cultures from

the different departments together, and they tend to, at times, not

merge or meld like they should. So we need to keep close look at

that.

It is my understanding also that you are convening an advisory

committee. That is due to be set up shortly, but the committee report won’t be due until May 31st. I think we are looking at you

bringing something up some proposed legislation in a time frame

shorter than that. How is the advisory committee going to work

with you to get a report out but, yet, you are going to get legislation before they are able to advise you?

Mr. SAMPSON. Great question. In the course of our meetings with

Congress and committee members and staff, it has become clear to

us that Congress wants a piece of legislation sooner rather than

later. At the same time, we want there to be meaningful substantive advice and input from a broad range of community and

economic development professionals, elected officials, researchers

from around the country. What we are doing is working on several

fronts simultaneously. It is our goal to have a basic structure of a

bill delivered to Congress so that you can begin to hold hearings

on a specific piece of legislation. There may be, in fact, some

placeholders or holes within that legislation that we submit this

spring while the advisory committee completes its work. Obviously,

I am well aware that the legislative process is a fluid process. We

believe that it is important to be responsive to you to get a piece
8

of legislation up here, and if it has some placeholders in it, we all

need to recognize those for what they are.

Mr. SHUSTER. And when that legislation comes forward, we certainly want to work closely with you in crafting that as we set up

and move forward, as I said before.

Finally, a question that I have is your view of infrastructure in

economic development. How important do you view that in this

new organization and just in economic development terms?

Mr. SAMPSON. Infrastructure is a critical component to building

community viability and enhanced economic opportunity. One of

the greatest challenges for our most distressed communities in the

United States today is the infrastructure is simply outdated and it

is not adequate to support the kind of twenty-first century private

capital investment that is needed for these communities to regain

their prosperity and to create more and better jobs for those communities.

We envision the proposal that the President has submitted actually increasing the flexibility for the use of these funds for infrastructure. For example, the CDBG funds currently have a number

of restrictions on the use of those funds for roadways and other

components that could support the creation of industrial parks and

business parks. So we believe this proposal will actually increase

available funding for infrastructure.

Mr. SHUSTER. Thank you.

I see the ranking member of the full committee just arrived.

Would you like to make an opening statement or would you—

Ms. NORTON. I would defer to the ranking member for a statement.

Mr. SHUSTER. The ranking member who has been a leader on

this issue and have told some people this is one of your babies. But

we certainly would like to hear from you.

Mr. OBERSTAR. Thank you very much, Mr. Chairman. It is good

to see a Shuster-chairing committee again in this room.

Indeed, EDA is a matter of long standing with me. I prize one

of the green pens that Lyndon Johnson used to sign this bill into

law on August 9, 1965, and EDA’s record of accomplishment is unequaled, I would say unparalleled except for that of the Appalachian Regional Commission in the Federal Government as a success

story.

Just recently, earlier this week I spoke to the International Economic Development Council. As Dr. Sampson knows—he has done

a splendid job of leadership at the EDA—EDA has invested perhaps a $1.5 billion over the years in community-based and initiated

economic development initiatives, and every year the 1.5 million

jobs created by those EDA projects are returning $6.5 billion in

taxes to Federal, State, and local governments. We are getting four

times as much back in tax dollars as we have invested in public

revenues into EDA-initiated projects.

Furthermore, this a bottoms up program, grassroots up program.

The Federal Government doesn’t come to any State or any development committee or any regional development commission and say

this is what you must do; they propose, and EDA evaluates and decides which of meritorious proposals to support.
9

So now we come to yet another initiative to dismantle EDA. This

document, Mr. Chairman,—about the time you were born, probably; hold on to these things—‘‘Program for Economic Recovery,

America’s New Beginning.’’ It was not a document for economic recovery, it was a document for abolishing a whole range of Federal

economic development programs. It proposed to download, downfund the FAA Airport Improvement Program, the Highway Construction Program, and the 1981 Reagan Administration proposes

to eliminate funding for the Economic Development Administration

and the regional development commissions of the Department of

Commerce, and the non-highway programs of the Appalachian Regional Commission.

Yogi Berra had a phrase for this: deja vu—he didn’t pronounce

it that way—all over again. Well, we are not going to stand for

that. Now, this is a thinly disguised initiative. You have been sent

here as a missionary with your staff and your rod to pronounce to

the Congress something that I doubt that you fully believe in. But

you have been sent up here to say we are going to bring together

a whole panoply of Federal Government programs, put them all in

one box, and then we are going to cut one-third of the funds. Then

we are going to hamstring this, we are going to send them out with

one arm tied behind their back and one foot tied to the other. Now,

that is not right.

This policy change will save more than $5 billion over the next

four to five years, they said in 1981. Well, Democrats and Republicans in the Congress stood up, and by a vote of 375 to forty-something we said no. And we are going to say no again, because this

is the wrong initiative and the wrong time. You don’t reverse 150

years of economic decline, as we have seen in Appalachia, in 20 or

25 years or 30 years. You don’t reverse the economic decline that

occurred in the chairman’s district and in the rest of Pennsylvania

in the rust belt and the steel valley, 100 years of the industrial revolution building steel mills, and then 20 years they are gone; the

jobs are gone, the people are gone. You don’t restore that economy

in another 10 or 15 years. It takes time to reinvest in the infrastructure, in the physical infrastructure, in the intellectual capacity, in the capital formation in those areas.

EDA has been the only effective tool that we have had to do this.

Community Development Block Grants, fine. They ought to stay

where they are. EDA has a very targeted mission, a very successful

mission. Bring all those charts that you want up here; they are all

concocted by some beaver in OMB, the same guy that probably

wrote this language 25 years ago. I don’t believe a word of it, I

don’t think any of that will work, I don’t like the idea, and apart

from that, I have an opinion.

So, Dr. Sampson, I have sympathy for you coming up here with

this mission, but I think we are better off with the structure as it

is than trying to restructure everything according to this grand

scheme.

I would be glad to hear your response.

Mr. SHUSTER. Mr. Chairman, we are not into the question and

answer period yet.

Mr. OBERSTAR. Oh, I am sorry.
10

Mr. SHUSTER. That is all right. Mrs. Norton, you will be up first,

but you are going to let the ranking member continue?

Ms. NORTON. I would certainly defer to hear a response, if that

is what—

Mr. SHUSTER. Sure. That is fine, because you were next, Mrs.

Norton, but I just wanted to—

Ms. NORTON. Do you want to hear a response to that? I certainly

would defer to get a response, before my questions.

Mr. SHUSTER. Go ahead, Dr. Sampson.

Mr. SAMPSON. Congressman Oberstar, you and I have worked

closely together over the last several years, and I think you know

I have always shot straight with you, I am a man of my word, and

I very deeply and sincerely believe that the proposal that the President has included in the budget is one which builds on the success

of EDA’s past and takes the Department of Commerce’s efforts to

a new level of assistance and service to the most needy communities in America.

The challenge in reducing poverty is that reliance on government

and philanthropic resources to get that job done is inadequate;

there is not enough money in the Federal budget, or State or local

budgets or philanthropic foundations to do that. What we have to

do is to deploy the Federal assistance in a way that it taps into and

unlocks the market potential of private sector markets.

I am proud of the work that EDA has done in the four years of

my stewardship. That record is not consistent across all 18 of these

programs, however. The OMB cross-cutting analysis has indicated

that most of these programs rate as some of the lowest performing

programs within the Federal budget, and we believe by learning

the lessons of the successful programs in the past, reducing the

fragmentation and the lack of focus and the lack of coordination,

that we can help our most vulnerable communities actually achieve

greater economic performance in the future.

And I just want to be very clear that I deeply and passionately

believe in the direction of the proposal before you today.

Mr. OBERSTAR. Well, I am sorry that you are.

Mr. SHUSTER. Mrs. Norton.

Let me just say something to the ranking member, just to let her

know we had a unanimous consent. We expanded the five minute

rule to ten minutes for yourself and ranking member of the Subcommittee and chairman for opening statements. I wanted to do

that because I knew how passionate you are about EDA, and I am

going to be a stickler about the five minute rule to run through efficiently. But, as I said, we extended that courtesy to both you and

Mrs. Norton.

Ms. Norton, go ahead with your questions.

Ms. NORTON. Thank you very much, Mr. Chairman. When you

speak about passion, I know that Dr. Sampson is aware that this

Congress is full of members with a lot of passion for the EDA programs, so you have to know what you are up against.

Dr. Sampson, I would hate to see your own credibility undercut,

because we work so closely and productively with you only a few

months ago, about six months ago, there was no more adamant or

passionate official for reauthorization. We depended very substantially on your evaluation of the program. Now, when you see a vir-
11

tual U-turn six months ago, I have to ask you just in the spirit of

candor—we understand that the Administration and the entire

Congress is under a great deal of pressure because of the deficit.

Because I am certainly not against reform, I ran a very troubled

Federal agency myself, so I would be very open to reforms. This

committee has been central to reforms. Is it the deficit, is it the

OMB and its concerns, which means the Administration, that have

caused you to take a very different position from the position you

took just six months ago, urging us to reauthorize precisely the

program you now are asking to be changed in fundamental ways?

Mr. SAMPSON. We would be proposing this reform regardless of

the budgetary and deficit situation. The reality is—

Ms. NORTON. Then why didn’t you propose it six months ago? I

mean, really, did you just get religion in the last few months?

Mr. SAMPSON. No, ma’am, I have had religion for many, many

years.

This has been a year-long crosscutting analysis of 18 different

programs that was very thorough, conducted by OMB, conducted

by Interagency Collaborative for Community and Economic Development efforts. When we proposed the reauthorization of EDA, that

analysis and that work was not completed. It was not completed

until the very first part of this year. This proposal was in dialogue

and discussion in the first part of this year. We came to you in

good faith with what we believed was our best recommendation for

the management of EDA and positioning EDA to be an effective

agency. We are committed to continuing to operate EDA in that

manner until something changes. But we came to you in good faith.

We believe that we got a strong bipartisan bill, and we believe that

we can work with you in the same fashion to, now that we have

the information about the performance of 18 other programs within

the Federal Government—and I would say that it is the track

record of EDA that led the President to make the decision to house

this new program at the Department of Commerce.

Ms. NORTON. Dr. Sampson, let me just warn you the next time

you come before this committee and ask us to do something the

way you did on reauthorization, and there is a year-long study in

progress, you have an obligation to tell this committee about such

a study, which was never mentioned. No one here can remember

the mention of any such study. And it is very disturbing to hear

that there was a study going on about some of the programs that

was never mentioned to us when we reauthorized. I just want to

say that to you. This goes to the credibility with which your testimony will be accepted in the future, as far as I am concerned.

Mr. SAMPSON. Well, may I respond to that?

Ms. NORTON. Yes, you certainly may.

Mr. SAMPSON. I hope that you will recognize that I have a very

specific portfolio that I am responsible for. I am not responsible for,

nor do I know everything that is going on at the OMB in terms of

all of the analysis. I came to you—

Ms. NORTON. Well, did you know about the analysis of these 18

programs at the time you testified before us? Were you a part of

that analysis? Were you asked your opinion on it during that period of time?
12

Mr. SAMPSON. There are many different levels of review. We participated in the Interagency Collaborative on Community and Economic Development, which was a study group of a number of committees looking at areas of overlap and effectiveness. At that time

there was not a specific proposal on the table for consolidation, it

was a study group. That is the level that I participated in.

Ms. NORTON. All right, I understand. And, again, my word to you

is that reauthorization is a very serious matter for us. If we are

reauthorizing programs that are being studied, crosscutting studies

or whatever, it is your obligation to inform the Congress so we can

take that into consideration. You know, I look at your testimony,

where you say many—

Mr. SHUSTER. Five minutes are up, and what we will do is we

can do another round of questions if Mr. Davis has a question. We

have ten minutes then the vote.

Mr. DAVIS. I don’t—

Mr. SHUSTER. Yes, Mr. Davis.

Mr. DAVIS. I don’t really have a question. I will later, if we continue the hearing. Are we going to do that when we get through

voting?

Mr. SHUSTER. Do you have further questions and want to continue? Do you have a question we can get through here in the next

five or ten minutes? Because we are going to be leaving here for

probably an hour.

Mr. DAVIS. So we probably won’t be back.

Mr. SHUSTER. We probably won’t be back for Mr. Sampson. We

will be back to the second panel, though.

Mr. DAVIS. First of all, I am from a small rural area. When you

look at congressional districts in this Nation, of the 435, the fourth

congressional district has the fourth largest rural residency of any

congressional district in America. I have 10,000 square miles. That

is a huge area. When I get in my pickup truck at home and I drive

to the other end of the district, I have to fill it with gas at least

once before I come back. It is that huge of a distance. But, yet, it

is in Tennessee, and you would assume that Tennessee, as small

as it is, especially from the north to the south, you probably

wouldn’t have that type of an area. I have the third highest number of blue collar workers in the congressional district I represent

of the 435. Now, what does that say? Lower income individuals in

a rural area. Who helps them? Rural Development Agency, the old

Farmer’s Home Administration, EDA, ARC, CDBGs, community

service block grants that go to our human resource agencies. All of

these are part of the lifeblood that keeps rural America and the

district I represent moving.

So, to me, any proposal that would enhance the opportunity or

that would bring to bear more dollars available and easier to obtain

for rural areas, I am for it. If it doesn’t, I’m against it. That is just

the way it is. I don’t have a choice, because there is only one person representing those folks in Congress; they only have one vote,

and it is this fellow who is sitting here today.

I have worked with Farmer’s Home Administration for a little

over a total—I worked USDA for 11 years, of which 10 of those

were with an agency called Farmer’s Home Administration. When

I started to work in Picket County and Birds Town, which had less
13

than 5,000 population, there was 212 individuals that had a treated potable water system. We now have over 2500. Where did those

dollars come from? These agencies that are about to be cut and

these agencies that may be dissolved as a result of some of the proposals here.

You see how much of a head shot it is to rural areas when we

start talking about retracting dollars from them? Let me read a letter from the Town of Ester Springs, which is a small county. It is

really a large town, to be honest, it is 2200 population.

‘‘Congressman Davis, the Town of Ester Springs is strongly

against the proposed elimination by President Bush of the Small

Cities Community Development Block Grant and the Appalachian

Regional Commission. These programs are vital to small communities to be able to provide much needed infrastructure to our residents. The Ester Springs water system was losing 56.2 percent of

the water that we produced because of leaking and broken water

lines. We simply did not have the funds available to construct a

comprehensive water rehabilitation project that would address the

problem. In 2004, we received $300,000 in CDBG funds to replace

those old braking waterlines. Esther Springs’ population is 2294 at

last count and growing. This population makes us the second largest municipality in Franklin County, but our homes and our business operate using septic tanks, and we do not have a public sewer

system. A sanitary sewer system is critical for our future growth

and development, and we had planned to apply for CDBG and ARC

funds in the near future for construction of this. Without grant assistance, we have no hope of being able to afford a sewer system.

The CDBG program is one of the very few grant programs available to local citizen candidates for much needed infrastructure. We

hope you will consider our request and understand the importance

of these grant funds for small rural communities.’’

If you live in a large area, EDA, CDBG, ARC, Rural Development Agency may not be important to you, but I can assure you

one thing: economic development and the opportunities and options

of life depend on such grant programs as this, and it is extremely

difficult for me to be able to vote for anything or support any area

that would make dramatic cuts in funding available to the least

amongst us in our society, and most of those least amongst us are

those with low incomes that live in rural areas.

Mr. SHUSTER. Thank you, Mr. Davis.

Now I know what a professional coach feels like when he has to

manage the clock. This is what we are going to do, because I know

Mrs. Norton and myself have a couple more questions. We are

going to recess for 10 minutes, and then come back and finish up

with Dr. Sampson.

But before we do that, Congressman Holden would like to introduce one of the panelists from the next panel.

Mr. HOLDEN. Well, thank you, Mr. Chairman, and thank you and

Ranking Member Norton for your indulgence here.

Mr. SHUSTER. I did ask unanimous consent that you be allowed

to introduce. Without any objection, so ordered.

Mr. HOLDEN. Thank you, Mr. Chairman. I will only take a moment; I know we have a vote coming up. But I would just like to

take this opportunity to welcome one of the panelists for the second
14

panel, and that is the mayor of Lebanon, Pennsylvania, Bob

Anspach, who is the mayor of the second largest city in my congressional district.

Mayor, I would like to take this opportunity to welcome you and

thank you for your input. I read with interest your concerns about

the proposal from the Administration the other day about the consolidation of the Community Development Block Grant program. I

was particularly concerned about the police protection at 8th and

Chestnut Street. Of course, you know that is where my congressional office is held, and I was very interested to read that in the

article.

But I do know that you have been doing an outstanding job as

the mayor, and I know that you bring your military experience to

being the chief executive, and I know that you are very concerned

about the ability for the Federal Government to continue to be a

partner with the City of Lebanon. So we welcome your testimony.

I will try to be back to hear it, even though I have read it several

times already. I am not sure I will be able to, but thank you very

much for being here.

And thank you, Mr. Chairman. Appreciate it.

Mr. SHUSTER. Thank you, Mr. Holden.

The committee will be in recess for approximately 10 minutes.

[Recess.]

Mr. SHUSTER. The committee will come back to order, and we

will start off with Ms. Norton for the second round of questions. We

want to stay on the five minute rule to try to get through the questions and get through the next panel before we get called for another vote, which will be in about a half an hour from now.

Ms. NORTON. Thank you, Mr. Chairman.

Dr. Sampson, in your testimony at page 4, you say that—and

here I am quoting—‘‘many communities with relatively low poverty

rates receive Federal funding at the expense of distressed communities.’’ That claim particularly interests me in light of the testimony that came before us at the time of reauthorization about the

core bases of funding, beginning with employment or unemployment, poverty. I understand that there are other factors. For example, some communities may have been at getting private sector

funding. If anything, we tried to encourage that kind of entrepreneurial use of the program.

In light of the fact that you now say that many of the communities that received this money are not the most distressed communities, I would like to ask you about how you know that and how

these programs were rated. You say that there was the Program

Assessment Rating Tool. I would ask you to explain how it worked,

whether you participated in the ratings, what were the elements

that were rated, what kinds of categories that were used. Again,

you have to understand I am trying to reconcile what we have done

with now what we are being asked to do, so I need to know more

about the ratings. I understand that you looked at 9 out of 18 programs, not every program, for example.

Mr. SAMPSON. Sure. Congresswoman, let me make clear there

are two separate issues here. When I spoke to you last summer and

fall, or earlier on EDA’s reauthorization, I was focused solely on

the program that I managed at that point in time, which was EDA,
15

and everything that I shared with you about EDA I stand behind.

What I am now talking about is the portfolio or this suite of programs within the Federal Government, these 18 programs that are

proposed for consolidation. So the remarks that you identified in

my testimony refer not just to EDA, but to the suite of 18 different

programs.

In answer to your question, I did not participate in the PART

process, that is an OMB initiative. Mr. Robert Shay at OMB runs

that initiative; that is outside of my portfolio. What I am providing

you are the summary findings of that OMB analysis. And I am

sure that we can get back to you in much greater detail. There are

about, I think, five or six, seven, eight different components to that

PART rating.

With respect to parting 9 of the 18 programs, those represent 95

percent of the funding that is targeted for consolidation. So the

bulk of funds targeted for consolidation have been rated by OMB.

Ms. NORTON. Don’t you think it was at least relevant to ask you

your view? I am all in favor of outside reviews. I also believe that

those of us who are for Federal programs have to be in a constant

mode of reform. So I hope you don’t misunderstand my questions.

But in trying to figure out what to do, whereas the outside evaluators are critical, don’t you think it was a little strange that you

were not asked for your opinion at all, so that there was some

benchmark to compare with?

Mr. SAMPSON. We participate, ma’am, in the PART process for

EDA; I have had extensive involvement in EDA’s PART analysis.

As a matter of fact, in my quest for continuous improvement at

EDA, I requested a second PART review analysis by OMB in a subsequent year, which is, I think, rather unheard of, because we initiated a number of improvement processes. So I have been involved

in the PART analysis of EDA. What I mean is I have not been involved in the PART analysis of the other 95 percent of the funds

that were parted by OMB.

Ms. NORTON. Are you aware that $18 billion, by our own calculations, will be lost in private investment if the President’s cuts of

$1.8 billion is affected?

Mr. SAMPSON. I am not sure what the basis of that calculation

is, ma’am. I would be happy to take a look at it.

Ms. NORTON. But you don’t see any loss in private investment?

You know that that has been a major part—

Mr. SAMPSON. No, ma’am. As a matter of fact, I strongly believe

that with the consolidation of these 18 programs into the Department of Commerce using more of the model that the Department

of Commerce has pursued in recent years, we will actually see private sector leverage and investment in these communities increase

above what it is now under the current 18 programs.

Ms. NORTON. Of course, some of these programs that have the

private investment will be gone, and apparently the private investment with it.

Mr. Chairman, I will end my five minutes here, since you are

going to dismiss this witness. But I have to say to you, Mr. Chairman, that I don’t see how we will be able to make any decisions

unless a whole set of questions are propounded in writing to this

witness.
16

You say in your testimony, for example, that the new program

will track progress toward goals, including increasing job creation,

new business formation, private sector investment. That is what

we thought this was all about; that is what we ratified.

And if I may, Mr. Chairman, I will need some clarification about

how you are going to do that better with these new programs than

you testified you were already doing it when we reauthorized this

program the last time.

Mr. SHUSTER. Well, I am sure that if the gentlelady submits

questions, the secretary and his staff will be more than happy to

submit back with the answers to her.

I would ask unanimous consent that all members be allowed to

submit statements and questions for the record.

Mr. SAMPSON. Mr. Chairman, not only will I be happy to provide

written answers to the ranking member, I am available to meet

with her and with other members of the Committee to have extensive discussions on these items. And I welcome that opportunity,

Congresswoman.

Ms. NORTON. Thank you.

Mr. SHUSTER. And I know your reputation as a results-oriented

person and a strong leader and person with impeccable integrity.

I know that we will be working closely with you as we move forward.

I have two questions. Could you please tell the Committee how

many jobs were created or retained by EDA as programs, as compared to CDBG? Do you happen to have that statistic?

Mr. SAMPSON. I believe—let me make sure I am giving you the right numbers. In fiscal year 2004, EDA’s $323 million in program

funds led to the creation of 160,000 jobs and leveraged $10.4 billion

in private sector investment. I believe, Mr. Chairman, that based

on Deputy Secretary Bernardi’s testimony before the Government

Reform Committee on March the 1st, that he testified that CDBG,

their economic development activities, which were funded at a level

of $434 million in 2004, led to the creation or retention of 78,000

jobs. I believe those are the accurate numbers to be reported.

Mr. SHUSTER. And those numbers came from the different departments, it wasn’t done by the inspector general, from his departments or outside?

Mr. SAMPSON. Not to my knowledge. For us, the numbers are the

numbers reported by our grant recipients on their grant applications, and then those are evaluated at the three, five, and I believe

the seven year marks, after the grant is awarded, to see whether

they achieved their projected levels of job creation and private sector leverage.

Mr. SHUSTER. That is twice as effective, EDA versus CDBG.

Mr. SAMPSON. Well, I believe that is indicative of my response to

the ranking member that I believe that in the consolidation at

Commerce, because of mission alignment and because of the Commerce Department track record of working with these funds—and

certainly the President believes that we will actually achieve greater results, which is what we all want, more results for the most

vulnerable communities and the most impoverished of our citizens.

Mr. SHUSTER. Without asking my second question, you have already answered. I was going to ask how do you respond to the criti-
17

cism of taking these various economic development grant programs,

putting them into Commerce, because your focus and expertise is

economic development. Would you care to expand on that at all?

Mr. SAMPSON. Yes, Mr. Chairman. Actually, EDA and the Department of Commerce have a very long historical and current

record of assisting both community development initiatives as well

economic development initiatives, including factors such as workforce training centers and other type of community facilities in both

urban and rural settings. One of the very unique features of the

Department of Commerce, is that our portfolio includes both urban

and rural settings.

And I was remiss, Mr .Chairman, if I might, in failing to respond

to one of the ranking member’s questions about how can I say that

many of these funds no longer go to the communities most in need.

That was based on the OMB crosscutting analysis, which found

that 38 percent of the HUD CDBG funds, for example, go to communities on an entitlement basis that have rates of poverty far

below the national average, such that we have communities in this

country with poverty rates of two and three percent that on an annual basis receive these poverty alleviation dollars. The Administration and the President believe those are fundamentally the

wrong priorities, that these funds need to be targeted to our communities that have the highest rates of poverty, the highest rates

of unemployment. So that is the source of that statement in my

testimony.

Mr. SHUSTER. Well, thank you, Dr. Sampson. We are going to be

working closely with you as we move forward. I know that the

ranking member has concerns, as do I. I am one that believes that

change is not bad as long as it is positive, and I think there can

be some positive changes that need to be made, but we want to

make sure that we don’t compromise the great success that I think

EDA has had over these last 30, 35 years or so.

So, again, thank you for being here today. Appreciate it and appreciate your candor.

Ms. NORTON. Could I ask unanimous consent, Mr. Chairman, to

put into the record the material from the City of Atlanta, the

American Planning Association, and a member, Mr. Blumenauer,

opposing the President’s proposal for this program?

Mr. SHUSTER. Without objection, so ordered.

Again, thank you, Dr. Sampson. You are excused.

Mr. SAMPSON. Thank you, Mr. Chairman.

Mr. SHUSTER. The second panel, if you could move forward.

Thank you all. Sorry for the delay there. We are going to try to

get through all of your testimony. Hopefully, you will be able to do

it in five minutes or less. I think the most important part is the

questioning afterwards, and we are probably going to get interrupted by a vote, but we will go as far as we can before we have

to stop.

The second panel today is a much larger panel, which includes

experts in the field of economic development and representatives of

local government to offer their perspective on the Administration’s

proposal.

Joining us today is the Honorable Robert Anspach, who Congressman Holden has introduced, the mayor of the City of Lebanon,
18

Pennsylvania, he is here on behalf of the National League of Cities;

Charles Fluharty, Director of Rural Policy Research Institute at

the University of Missouri; and from my district, Ed Silvetti, the

Executive Director of Southern Alleghenies Planning and Development Commission—Ed, it is good to see you here today—and Ken

Jones, First Vice-President of the National Association of Development Organizations and Executive Director of the Lower Rio

Grande Valley Development Council. That is a mouthful.

Since your written testimony has been made part of the record,

the Subcommittee will request that all witnesses limit your testimony to five minutes, and we will ask questions afterwards.

With that, Mr. Mayor, I would like you to go ahead and start.

STATEMENTS OF HONORABLE ROBERT A. ANSPACH, MAYOR,

LEBANON, PENNSYLVANIA; CHARLES FLUHARTY, DIRECTOR,

RURAL POLICY RESEARCH INSTITUTE, UNIVERSITY OF MISSOURI; EDWARD M. SILVETTI, EXECUTIVE DIRECTOR,

SOUTHERN ALLEGHENIES PLANNING AND DEVELOPMENT

COMMISSION; AND KEN JONES, FIRST VICE-PRESIDENT, NATIONAL ASSOCIATION OF DEVELOPMENT ORGANIZATIONS,

EXECUTIVE DIRECTOR, LOWER RIO GRANDE VALLEY DEVELOPMENT COUNCIL

Mr. ANSPACH. Mr. Chairman and members of the Subcommittee,

my name is Bob Anspach. I am mayor of Lebanon, Pennsylvania,

and I am here today representing the National League of Cities

and the Pennsylvania League of Cities and Municipalities.

The NLC and the PLCM’s concerns with the Administration’s

Strengthening America’s Communities initiative is threefold: the

proposal, first, would drastically reduce community development

funding that cannot be replaced; the proposal would alter eligibility

requirements to the disadvantaged of some low and moderate income communities; and, finally, the proposal would narrow the

mission of the CDBG program, which would reduce its flexibility

and its effectiveness.

The Administration’s proposal would consolidate 18 current programs with a combined fiscal year 2005 budget of $5.6 billion into

a new two-part grant program with only $3.7 billion in funding.

This is a drastic cut of nearly $2 billion. What is even more alarming is that the plan will raid the majority of its funding from the

CDBG program.

The Community Development Program has played a critical role

in rejuvenating distressed neighborhoods and alleviating economic

decline in all types of communities. It is one of the best and only

tools currently available to spur on economic growth. However,

CDBG is not just a jobs creator or economic development incubator.

It is also a catalyst for affordable housing and new public infrastructure.

For example, in Lebanon we dedicated $331,000 in block grant

funds to demolish vacant and blighted buildings in certain neighborhoods throughout the city. These structures were havens for

crime, targets for vandalism and fires, and an attractive nuisance

to our children. The city used the vacant lots and created larger

yards for some houses, off-street parking in high-density neighbor-
19

hoods, and accepted proposals to develop owner-occupied housing at

the site of an abandoned factory.

The Administration, the Congress, and cities across the Country

can all applaud many partnerships. Certainly, these projects are

but a few and a small representation of many successes in the 30

years of the block grant. Yet, despite measurable successes, the Office of Management and Budget proposes to cut CDBG in favor of

SAC. So what is their rationale?

First, OMB claims that SAC will better fund communities most

in need of assistance by creating new eligibility criteria around national job loss, unemployment, and poverty rates. Too many communities, it says, are receiving funding even though they no longer

need assistance, an they have poverty rates that are below the national average. The details are still unclear as to which communities will be eligible for SAC grants, but it seems clear that they

must, at the very least, have poverty and job loss rates above the

national average. If this is so, then the Administration has made

the mistaken assumption that impoverished neighborhoods no

longer exist in communities ranking above the national average on

the poverty and job loss index.

We at the local level, however, know this is far from reality.

Using national averages to measure assistance needs ignores the

reality that our Nation is comprised of local economic regions that

are unique. For example, the majority of families who earn below

the regional median household income in the greater WashingtonBaltimore metropolitan area may earn more than the national poverty rate, but they are just as much in need of assistance because

the cost of living in this region is so much higher.

Second, the OMB claims that programs like CDBG have no

measurable results. The Administration’s proposal suggests new

performance standards like job creation, new business formation

rates, commercial development, and private sector investment as

tools to determine whether communities receiving SAC funds are

achieving results and, thus, their eligibility to retain funds or to

gain bonus grants.

Unfortunately, measuring results by these criteria make little

sense for communities that are chronically impoverished, have little to offer in the way of resources, and are unlikely to show significant progress over a relatively short period of time. In short, they

are being set up for failure. It is very difficult to assess the impact

of removing a drug den from a neighborhood using economic criteria alone. Moreover, it is difficult to assess economic impact in relation to this type of project over a short period. Yet, the Administration’s proposal appears to try to do just that.

Mr. Chairman, closing down a drug den may not immediately

create job growth, spur new businesses, or encourage new commercial and residential development. However, it will immediately increase the neighborhood’s quality of life. That is measurable and

that is the foundational beginning of any plan to attract new commercial and residential development in the future.

Throughout Pennsylvania you will find that in virtually every

city there are places of poverty, and we have to understand that

the Administration’s one-size-fits-all approach will likely stifle the

flexibility and effectiveness of the monies used. We therefore,
20

through the NLC and the Pennsylvania League of Cities, will aggressively continue its campaign for the continued existence of a

strong and distinct Community Development Block Grant program.

Thank you, sir, for your time and look forward to your questions.

Mr. SHUSTER. Thank you, Mayor Anspach.

Mr. Fluharty? You may proceed.

Mr. FLUHARTY. Mr. Chairman, I thank you for the opportunity

to have a rural perspective placed in this discussion today. I would

like to make three very brief remarks about the rural context for

this proposal.

First of all, if we fail to ignore the unique rural context in these

decisions, that will result in a failure to optimize the opportunities

for our Nation that exist in these rural areas. Secondly, acknowledging this context and paying specific and detailed attention to

the rural context will, by necessity, alter the design and delivery

of this program in rural America. Finally, if this is done, I believe

we can craft the twenty-first century rural regional innovation system that I lay out in my testimony; that is, a system that is sensitive to place, culture, and unique circumstance, operates in an

asset-based development framework, and is centered around rural

entrepreneurship and rural governance.

A word about this rural context. Each year this Federal Government spends two to five times as much per capita on urban than

rural community development. Two to five times. In the most recent rural data year, that is a $14 billion annual community capacity disadvantage in rural America. Now, of the $30 billion that is distributed annually by our na- tion’s foundations, only $100 million gets committed to rural development. If we look at a recent study of the 124 Fortune 500 companies, their corporate giving in this nation in the year 2000, they

gave $12 billion to community and economic development, but only

seven-tenths of one percent of that went to rural grants. These realities in rural community capacity disadvantage simply cannot be

ignored, in the face of this challenge.

Before we go any further, I believe, in this really serious discussion about this policy change, we really need to look at this immense structural regional capacity disadvantage in rural communities. And each year, Mr. Chairman, the Federal Government exacerbates that by its funding formulas.

Finally, we can’t divorce community and economic development

in rural areas, as you know. The playing field is simply too inequitable right now, and the Federal Government must address the

needs that rural areas have to get to a development-ready framework.

I fully agree with Assistant Secretary Sampson, in his testimony,

that sound investments in community development must lay the

groundwork for sound economic development. That is essential in

the rural context.

In closing, small business is the backbone of this nation. This is

particularly true in rural America. Rural job creation, rural new

business formation, private sector investment, all very laudable,

very appropriate goals. It is critical that we focus on these. Scaling

that opportunity in rural America, however, Mr. Chairman, is

going to require a vibrant rural entrepreneurship system, which
21

will not develop unless we pay attention to, and give credibility to,

the community capacity and intermediary organization support

that my testimony lays out.

I also agree with the Assistant Secretary that each community

is different and that we need a different road to tackle each community’s needs. I could not agree more. This is also particularly

critical in rural America. There is an old saying: If you have seen

one rural community, you have seen one rural community. That is

very, very true. Commitment to that premise will result in a program design which ensures two things: local flexibility and locally

based organizational capacity to support development and implementation of regionally appropriate strategies.

So in closing, Mr. Chairman, there are many comments I could

make. I have tried to make the three most critical rural policy

issues clear. You know, we live in a society in love with the quick

fix. Rarely do we commit to anything for the long haul. We have

done that in economic development in this nation, and that is exactly what is required if we are going to build vibrant rural communities that can fully contribute to our national economy. Where

these investments are made, there is a miraculous rural renaissance starting, so I would urge this Congress and this committee

to sustain and nurture this unique competitive advantage, that is

local; to recognize unique approaches are essential and to assure

the community capacity for our under-resourced and challenged

communities is not divorced from economic development.

Thank you, Mr. Chairman.

Mr. SHUSTER. Thank you, Mr. Fluharty.

Next, Mr. Ed Silvetti, who is a good friend of mine from Blair

County, Pennsylvania, and a long-time economic development planner and leader in our community.

Ed, appreciate you being here. Go ahead.

Mr. SILVETTI. Good afternoon. Thank you, Chairman Shuster and

members of the Subcommittee, for your invitation to testify today

on behalf of Federally supported local economic development efforts

in the sub-State region of Pennsylvania that is predominantly rural

and one that has benefitted immensely from community and economic development programs promulgated by the Congress. I

would like to acknowledge Chairman Shuster, in whose ninth congressional district of Pennsylvania I live and work on behalf of

which my organization’s efforts are directed.

I have been, for the past 12 years, Executive Director of Southern Alleghenies Commission, headquartered in Altoona, Pennsylvania. Altoona is one of our two principal cities and along with our

counties in South Central Pennsylvania, these being Blair, Bedford,

Cambria, Fulton, Huntingdon, and Somerset. As a public nonprofit

development agency, the Southern Alleghenies Commission has

served the community and economic development interests of the

region’s citizens since 1967. In recent years, I have served as President of Pennsylvania’s association of regional councils, as well as

President of the Development District Association of Appalachia.

This organization comprising the 72 Local Development Districts

designated through the Appalachian Regional Commission. My

point is that I think this has given me a perspective well beyond

where I live and work in the congressman’s district.
22

I would like to focus, if I may, on how economic development

plays out in rural Pennsylvania and across this Country. My intent

is not to discourage consideration of alternatives such as the President proposes, but to try to demonstrate in some small way the importance of the Economic Development Administration and other

programs in meeting the need for economic stimulation and job creation.

For the record, Southern Alleghenies Commission is a designated

economic development district under the Public Works and Economic Development Act. This being said, Southern Alleghenies

Commission does receive a small planning grant annually, as well

as we administer a number of revolving loan funds, one of which

is capitalized through the EDA.

But from my professional vantage point, the necessity for public

infrastructure and the identification of infrastructure as lacking in

this Country really has waxed and waned for as long as I can remember. I am here today to tell you that inadequate public infrastructure and deteriorated infrastructure has never been off our

agenda. A lack of broadband, water service, sewerage service, and

highway access to business and industrial sites preempts our ability to respond immediately to major economic opportunities presented by larger businesses and manufacturers. What remains for

those of us in rural Pennsylvania is oftentimes competing for lower

tech, lower paying jobs.

I would also like to state for the record that it is the belief of our

board of directors, comprised of locally elected officials from our six

counties, that the EDA has been the singular Federal program that

has helped to support the establishment of business parks, industrial parks, and attendant infrastructure that has in turn supported a huge portion of economic growth and resulting new jobs

in our small corner of this Country.

Within our six county region, we have made the prudent decisions and recommended these for EDA consideration. Many of

these investments have gone in our more urban counties, but our

organization’s proudest moments have been when we have brokered Federal investments in our most rural counties in response

to economic opportunity to see jobs created in areas where, without

public investment, no jobs or very few jobs would have been created

at all.

I wish that all members of this Subcommittee had the opportunity to attend the groundbreaking and ribbon cutting for the Fulton County Business Park. Fulton County has a population of barely 15,000 people, but this business park has already supported the

expansion of several manufacturers and, with its recent tax-free

designation, holds the promise of creating many more jobs onsite.

Without EDA’s investment, this project simply would not have happened.

As I have stated, our organization was incorporated in 1967 by

a number of political and business leaders in our region who foresaw the necessity to plan and deliver economic and community development services on a broader geographic and political basis than

at the sub-county, municipal, or even county level.

Suffice it to say that for well over 35 years, Southern Alleghenies

Commission has been working hard to make our region a better
23

place in which to live, work, and do business. We have a solid reputation and are committed to continuing to promote progress

through regional multi-county cooperation. Southern Alleghenies

provides administrative, professional, and technical assistance that

simply is not available within individual municipalities, and, likewise, many of our business services that we provide require expertise also not available in most of our small and medium sized businesses that comprise rural economies. We help our communities

and we help our businesses to compete in an economy that

stretches far beyond the geographic confines of Southern Alleghenies Pennsylvania. Federal programming, particularly like the

EDA, support these efforts.

I can summarize much of what we do as a regional council,

Chairman Shuster and members of the Subcommittee, by stating

simply that we prudently manage a sifting process. There has to

be some entity that undertakes a cost-benefit analysis of projects

and makes those recommendations to Federal agencies like EDA.

And, again, thank you to the Committee for the opportunity to

testify today.

Mr. SHUSTER. Thank you.

Mr. Jones, let me say we have a vote going on, but we will be

able to get through your statement. Don’t rush. I have got about

10 minutes until I have to be over there, but try to keep it under

five would be greatly appreciated. Go ahead, Mr. Jones.

Mr. JONES. Thank you, Mr. Chairman. Again, afternoon to all,

and my thanks to you, sir, and the members of the Subcommittee

for the opportunity to be here today. In my oral remarks I will

summarize the four main points outlined in my full written statement.

First, the current portfolio of 35 community and economic development programs offers vital resources for our Nation’s distressed

regions. While we agree with the Administration that every Federal program should be and must be reviewed on a continual basis,

we feel the primary weakness in the current system is the lack of

financial resources. At a time when nearly every American business and community is confronted with intense competition from

emerging and developing nations, we should be expanding Federal

investments in infrastructure and other community and economic

development projects. Instead, we are facing nearly $2 billion in

Federal cuts and elimination of 18 valuable and proven programs,

most notably the Economic Development Administration and

HUD’s CDBG program.

Second, Mr. Chairman, the Economic Development Administration and its local partners have a proven and documented record

of exceptional performance and accountability. This is evident in

the fact that Congress has passed, with the leadership of this committee and the overwhelming bipartisan support from both chambers, two multi-year reauthorization bills for the agency since 1998.

As outlined in the President’s 2006 budget, and as was mentioned

earlier, EDA was ranked as the highest performing agency within

the portfolio of 35 Federal community and economic development

programs. This is high praise from the OMB. Most importantly, the

value of EDA planning, economic adjustment and infrastructure in-
24

vestments have been positively experienced in hundreds of urban,

small metropolitan, and rural communities across the Nation.

My third main point is that inadequate public infrastructure remains the most significant roadblock to local economic development. This committee understands this point, as it constantly

strives to secure additional investments in our Nation’s roads,

bridges, water infrastructure, and airports. When it comes to community and economic development, EDA is an instrumental and effective partner for local communities, especially in small towns and

rural America. While it is true that the private sector creates jobs,

it is equally true that the private sector relies, expects, and demands that public entities such as State and local governments

provide and maintain essential public services and infrastructure.

Without the industrial parks, business incubators, access roads,

rail spurs, water and sewer facilities, and job skills training facilities build with EDA assistance, most of our Nation’s distressed

communities would be ill equipped to sustain, let alone attract, private sector industries.

In my written statement I outline numerous real world examples

of the impact of EDA and its infrastructure investments. The same

can be said for programs such as HUD’s CDBG program. In my

home State of Texas, we use the CDBG small cities non-entitlement funds primarily for water and wastewater projects. According

to the Texas Water Development Board, my State has over 3400

cities and unincorporated areas with inadequate water and wastewater facilities for residents and businesses. The cost to help these

communities approaches the level of $5 billion.

Finally, Mr. Chairman, the members of NADO adamantly oppose

the elimination of the EDA planning program for economic development districts. This modestly funded, yet highly effective program

serves as the lifeline for the Nation’s under-served and distressed

regions. As concluded by a recent Wayne State University study,

these organizations provide the critical backbone for economic development planning at the regional level. The planning districts

use the EDA planning grants for more than just developing strategic plans. More importantly, we have built the professional expertise and organizational capacity to bring key public and private

stakeholders together within our region. We are involved in our region’s progress from the planning and design phase, right through

to the actual implementation of the specific projects.

I must also note that the Administration is now introducing the

concept of multi-year strategic growth plans. If the EDA district

planning program was eliminated, our local communities would not

have the capacity to craft, coordinate, and implement professional

strategic plans.

In closing, Mr. Chairman and members of the Subcommittee, I

want to reinforce our strong support for the current portfolio of

Federal community and economic development programs, especially

the Economic Development Administration, HUD’s CDBG program,

and the USDA’s rural development mission area. We are deeply

concerned about the potential loss of nearly $2 billion in Federal

grant assistance each year for distressed communities. We are also

anxious to learn more about the details of the Administration’s

plan, since the current proposal is only in brief outline form.
25

Finally, we are most troubled by the proposed elimination of

EDA planning program for economic development districts. Without this essential program, our Nation’s distressed and rural communities will be faced with severe burdens and obstacles in their

pursuit of economic growth and prosperity.

And I thank you again, Mr. Chairman, and welcome any questions at the appropriate time.

Mr. SHUSTER. Thank you. Right as the red light went on.

Again, I am going to have to leave for a vote. I wanted to ask,

first of all—we are going to recess. It is probably going to be about

20 minutes, I would think, at the most. Does anybody have to catch

a plane that they need to get out? Like I said, I should be back

in 20 minutes, maybe a little less than that. So we will recess for

20 minutes. Thank you.

[Recess.]

Mr. SHUSTER. The meeting will come back to order. I am a little

out of sorts going back and forth. I am prepared, I can go down and

stand on the sidelines, this is not a pro football game, help them

manage the clock. But there is not going to be any interruptions

now, so we can proceed.

Again, I want to thank all of you for your patience and for being

here today.

A question I guess for all of you to field, and that is if each of

you could tell me what your thoughts are on the role of public infrastructure and economic development, how important it is, where

it sort of ranks in the economic development field. Start with you,

Mr. Mayor, and just go down.

Mr. ANSPACH. Thank you, sir. I believe that infrastructure is important as you look at an economic development program, but I believe that economic programs have to be holistic. I was fortunate

to go to a seminar where the Pella Company that makes windows

did a presentation on what they were looking at when they were

choosing a new site for their plant, and it was an eye-opening seminar for me because while certainly infrastructure was part of that,

they also looked at the community as far as what recreation was

available, what the safety was in the community, how the community looked, and there was a whole list of things.

So while I agree that infrastructure is important—obviously if

there is no water there, they can’t build a food plant that is going

to process food—on the other hand, the first thing that a lot of companies do when they are coming is look at the entire community

in a very holistic way. And that was, if I might say, that one of

the reasons for urban areas that we look at CDBG as such an important thing, is that it allows us to develop a program over a number of years that addresses those issues with ultimately working

also at the infrastructure. In my community we replaced water

mains and streets regularly with CDBG monies. That works for our

community.

Mr. SHUSTER. Mr. Fluharty?

Mr. FLUHARTY. I just would second all of that and say in a rural

perspective, you know, Mr. Chairman, it is absolutely critical, if

you look at my numbers, in terms of a 10-year period of Federal

funding for community capacity, we are down—you can pick the

number, but it is real money—close to half a trillion dollars in com-
26

munity capacity. I would also agree, however, that it is necessary;

it is certainly not sufficient.

This was very intriguing to me. This year, I moderated a panel

at the National Association of Development Organizations’ annual

conference in which they uniquely asked all the professionals in the

room to do on-time polling of issues. It was a very fascinating conference. It remained their number one issue-infrastructure. It was

very interesting. And in a rural perspective that is still absolutely

critical.

Mr. SILVETTI. I will echo this gentleman’s remarks with regard

to infrastructure in rural areas. In rural areas with a dispersed

population, putting in infrastructure becomes very expensive for individual users. In my written testimony I cite three recent EDA investments in our region, one in Huntington County, one in Southern Blair County, and one in Cambria County. The one in Blair

County resulted in a $45 million investment by a regional corporation. The one in Huntington County resulted in investment of an

electronics firm not that many years ago, and there was just an announcement within the last month for the industrial park supported with EDA grant of, I think, $600,000 where a company is

going to build a $42 million plan in support of wind energy. That

investment and infrastructure by EDA simply would not have occurred was it not for EDA’s assistance in rural infrastructure. Vitally important.

Mr. SHUSTER. Mr. Jones?

Mr. JONES. Ditto, Mr. Chairman, as well. Infrastructure remains

a top priority within our region. We are talking water, sewer,

drainage, and also the water conveyance system for our water supply system coming from the Rio Grande River. And also that has

expanded on a national level, as mentioned earlier, in terms of the

NADO E Form. That was the overlying priority of all the regions

nationally, was the infrastructure component.

Mr. SHUSTER. Mr. Mayor, if the funds currently being spent by

CDBG were not being cut and were at current levels, would the

League of Cities continue to oppose the President’s plan?

Mr. ANSPACH. I believe that our position is, and certainly my position would be that if the Community Development Block Grant

program remains funded at the $4.35 billion and $4.7 billion overall level, and it remains within HUD, that there would be no objection to the current program and no objection to the Commerce program.

Mr. SHUSTER. Why should it remain in HUD? If the Administration is going to put something together that is going to have the

same kind of focus and the funding level, the League of Cities is

still going to oppose?

Mr. ANSPACH. Let me answer for myself philosophically. I am

philosophically a conservative, and I am against rearranging government just to rearrange government, because that rearrangement is going to cost money and it is going to be taxpayers’ money.

I would suggest that there is a program in place under CDBG that

works. It is really, I believe, a poster child for a conservative philosophy in that it is a perfect Federal program that makes a block

grant to the communities, and the local community makes the decision on how that money is used based on their five-year plan or
27

their needs at that time. And that is what we, as conservatives, believe, is that the Federal Government should become smaller and

that the power should be divested to the local governments. The

CDBG program under HUD does exactly that. So I would suggest

that in that particular program, rather than spend money to transfer and move all the systems to another department, I would suggest that the old saying that if it isn’t broke, don’t fix it belongs

in that particular category, sir.

Mr. SHUSTER. Mr. Fluharty, how would you respond to that?

Mr. FLUHARTY. I would make one comment on CDBG from a

rural policy perspective. I would also agree with everything that

was just stated. The one additional thing I would say is as we look

at CDBG in the future, wherever those programs end up, we now

have 600 micropolitan areas in the United States that are now a

rural ′′place′′, that is, a Federal ′′place′′ designation. Those 600 regions are geographically dispersed across the United States and

would create an interesting platform to alleviate the one disadvantage I see in CDBG, and that is the small cities program really

doesn’t allow multi-year capital or strategic financing to go forward. If we were to do something like that, it would improve the

program for rural regions, if we were to create more of a regional

focus. But beyond that, I think the real—

Mr. SHUSTER. Could you explain that a little more in depth?

Mr. FLUHARTY. Sure. As I say in my testimony, there are several

states that have done really interesting things with their small cities CDBG, looking at what I talked about, which is to scale regionally to get advantaging for capacity, to compete in a global economy.

Mr. SHUSTER. And how big is that region you are talking about?

Mr. FLUHARTY. I would urge—

Mr. SHUSTER. Based on population or geography?

Mr. FLUHARTY. No. I would urge you look at the Rural Strategic

Investment Program that I indicated was in the last Farm Bill. I

think regions need to self-define, by the economic competitive niche

they have. That is how the region should be defined. And then the

question becomes to go to the conservative philosophy, ′′How do we

move the funds to the lowest possible level to let that competitive

advantage express itself, across the landscape in a logical economic

capacity?′′ Right now, because of the small cities program dynamics, it is very hard for small communities to do multi-year planning; they just aren’t sure it will be there.

I would urge this committee, if we are serious about rural, to

think about a modus vivendi that would let that open up a bit. It

would truly advantage better regional entrepreneurship development.

Mr. SHUSTER. We have tried very hard under Ed’s leadership to

work regionally.

Mr. FLUHARTY. Right.

Mr. SHUSTER. Ed, do you think the region that you have is broad

enough? Do you think we should be expanding those regions or do

you feel what we have with those—what is it, six counties, seven

counties? Is that large enough?

Mr. SILVETTI. I think the area is large enough. I don’t think it

is too large. I think within our six counties, obviously, we have a
28

couple of different sub-regional economies, and they look at some

different things, although with the loss of transportation jobs with

the railroad, with the loss of coal and steel jobs, all of us are kind

of diversifying and moving toward the same end. With respect to

Strengthening America’s Communities, I think some of those programs you really have different constituencies. And even though I

think we do a really good job as a regional council in doing multiyear planning, I would be a little concerned about our success if we

could bring together quite divergent constituencies that are represented by some of these programs. Some of the programs I think

do fit together pretty well, some of the USDA economic development programs, EDA, but some of the others it is a little confusing

to me, frankly, without seeing more details of this proposal.

Mr. SHUSTER. Right. And that is to be worked out if we are to

move forward.

Mr. Jones, in your part of the world, Texas, you are a regional

developer. How big are your regions?

Mr. JONES. We have one of the smallest in geographical area, a

little over 3,000 square miles that is three counties. There are only

two other three-county regions within the State. The balance could

be as high as 15 to 18 counties, especially up in the panhandle region of West Texas. So it is quite large. But an interesting thing

is that the boundaries, as they have developed from our creation

back in the late 1960s, have been pretty much on target because

there has only been very minimal county changes within the planning regions throughout the State in that length of time. So the development patterns are working well. Another reason for that, too,

is I think our ability as individual development districts, councils

of governments, to not only address the issues within our region,

but also to work cooperatively with each other for those issues that

may expand our immediate geographical planning boundary that

affects the constituents that we serve as a whole.

Mr. SHUSTER. And the area is rural where you live?

Mr. JONES. Well, we are getting more urban. Right now our population is just a tad over a million, and it has grown enormously

over the last 20 years in terms of development there on the border.

But we have, even with that population base right outside immediate urbanized areas, it gets rural really quick. The majority of

our municipalities are still well less than 10 to 15,000 in population.

Mr. SHUSTER. Mr. Mayor, what is the population of Lebanon

now?

Mr. ANSPACH. Twenty-five thousand, sir,—

Mr. SHUSTER. Twenty-five thousand?

Mr. ANSPACH.—is the city population,

Mr. SHUSTER. I didn’t think it was that big.

Mr. ANSPACH. It is a 50,000 person metropolitan area.

Mr. SHUSTER. And it is growing, isn’t it?

Mr. ANSPACH. It is growing, yes, sir.

Mr. SHUSTER. That is what I thought.

Mr. Fluharty, you mentioned community capacity. Could you explain that a little more in depth for me?

Mr. FLUHARTY. Sure. It is really what the planning districts do,

and it can occur from different institutional settings. But it really
29

is the glue, the ability to create a strategic sense of how organizations move forward to enable that to occur on the ground. It is really what these gentlemen do everyday. In some venues there is

going to be an alternative intermediary come forward, but where

these organizations are working, they are providing phenomenal

glue to build where there is no capacity, unlike what exists in

urban areas, as I indicated, with greater support from the Federal

Government, the foundations, or corporate giving. That is the absolutely essential thing to understand about our rural competitive

disadvantage. And that stewards public funds more effectively, because we need technical assistance and we need strategic thinking,

to wisely spend the public’s money. If that goes away, you lose the

ability to do the right thing with public policy at the local level.

Mr. SHUSTER. And I think we lose—and maybe you could comment on this, all of you. We have a difficulty attracting capital. I

think urban areas aren’t having those problems. Can you comment

on that and maybe some of the solutions that you have?

Ed, why don’t you go ahead and start?

Mr. SILVETTI. I will say one thing. I listened to a presentation

about a year ago through the Pennsylvania Governors Action

Team, which manages the process of companies that are looking at

Pennsylvania in which to locate, and there was a startling fact that

I really hadn’t considered before, and that is the vast, vast majority

of prospects looking at Pennsylvania. We are looking at Southeastern Pennsylvania, an urban area, and the Pittsburgh Allegheny

County area, which left, I think, something like 5 percent, at best,

of prospects looking at the entirety of the remainder of Pennsylvania. Somebody, some entity, some agency, some public agency

has to work on behalf of the rest of Pennsylvania, the rural area

of Pennsylvania in developing projects and trying to attract capital

that is going to create jobs, and I think that does happen within

the framework of what we have. I think there is a decent process

out there that the local elected officials and municipalities have

been able to take advantage of successfully.

Mr. SHUSTER. Mr. Jones?

Mr. JONES. It gets back into the priority issue of infrastructure

development I think in attracting business and industry within the

respective regions, and that basic foundation is the key to attract

folks. We had, less than 10 years ago, almost a critical economic

situation with water supply issue in terms of the lack of water, and

in terms of the negative impact that that had on the perception

and folks looking at locating and actually starting and expanding

businesses within our region became a critical issue. But that is

looking much better now through a lot of reasons, and one with

some initial funding from EDA. And to get within a region within

our district, to be able to get some normally, in some cases, competing stakeholders together on the same page, with a central focus

to make things happen, and we are making some headway on that.

Mr. SILVETTI. Could I add one more thing?

Mr. SHUSTER. Sure.

Mr. SILVETTI. I don’t necessarily subscribe to the proposition that

‘‘build it and they will come.’’ They will come; however, when you

look at the investments that have been made—and I will just talk

about our region—the investments that have been made in infra-
30

structure that supports business and industrial parks, the fact of

the matter is we need that speculative investment, and where

those investments have occurred we have had capital investment

follow with the attendant jobs. It is that simple.

Mr. FLUHARTY. Mr. Chairman, if I could add.

Mr. SHUSTER. Sure.

Mr. FLUHARTY. I think I would be remiss if I did not say we can

improve. And it is going to be really critical to understand we are

in a global market, and we are going to have to export outside of

our regions, and we need serious institutional renaissance in a lot

of our regional capacities. That is the glue that these gentlemen

bring, and you can simply see it. It is palpable on the ground when

you are in a region and a good intermediary organization exists, or

it doesn’t.

But I will say there are issues in this Strengthening America’s

Communities initiative which I think must be re-examined, and I

believe—

Mr. SHUSTER. Such as?

Mr. FLUHARTY. I think it is really critical to reassess asset-based

development. Regions have different capacity, and I think if we do

away with the planning and strategic infrastructure support for

these districts and their work, that is going to go away, and that

has been critical in making good public choice. I would actually

argue we should increase that funding. We have local officials making multimillion dollar decisions, very often needing additional

public decision support monies. Those don’t exist right now, and

they don’t need to be competing with one another. I would argue

that funding should increase. That would not be a drain on the

public sector, it would make wiser public choice.

Mr. SHUSTER. And, Ed, I believe you use CDBG money for a

planner or where is your funding stream coming from for a planner

that you use?

Mr. SILVETTI. The funding that we receive to undertake planning

principally comes from the Economic Development Administration

in part, also some other Federal and State agencies. We do not receive directly CDBG funds; however, it is not unusual for us to

interact with a city or a county which has CDBG funds and see

those projects go into a project that we also are supporting by virtue of analyzing projects and making recommendations for other

Federal investments with agencies such as EDA.

Mr. SHUSTER. Mayor?

Mr. ANSPACH. If I could, sir.

Mr. SHUSTER. Sure.

Mr. ANSPACH. Just to echo Mr. Silvetti, it is imperative that we

do look across municipal boundaries when we are looking at how

we address these things. I also sit on the Regional Economic Development Board, so I understand both sides of the equation, and it

is very, very important, and we have in fact projects where we are

using CDBG monies as part of the study in order to get something

that is going to benefit multiple municipalities, and we are paying

for our portion of it that way. And it is, I believe, a good thing, and

we have to look bigger, larger away from just our community and

look into the county and look into the next county.

Mr. SHUSTER. How big is your region of the board you sit on?
31

Mr. ANSPACH. It runs roughly from Lebanon County west to

Chambersburg and Dolphin County, Lancaster, York, and that

South Central Pennsylvania region.

Mr. SHUSTER. Well, again, I want to thank you all for being here.

Mayor, you had the first word and the last word, and that is appropriate being the elected official out there.

And I just want to thank you all for being here. I appreciate your

views. Your views are important as we move down the road to look

at this proposal. I have great concern that when we set up—and

that is virtually what we are doing; they are saying we are not, but

we are setting up a new agency, and I think that there is peril out

there, when you do that, to not get an organization that takes some

things that—EDA I think has done a very good job, and I would

hate to see that lose its effectiveness in a larger organization. So

I know that the ranking member, as I said earlier, has concerns,

as do I, and we are going to be working very closely with the Secretary, and we would like to be able to tap into you for your input

as we move down the road to be able to really get where the rubber

meets the road, how would it affect you and what we could do to

improve the various ways that those 18 organizations or entities

operate.

I know that the ranking member has some questions that she

would like to submit to you to have you answer, so we will do that.

I would ask unanimous consent that the record of today’s hearing

remain open until such time as all the witnesses have provided answers to any questions that may be submitted to them in writing.

Unanimous consent during such time as the record remains open,

additional comments offered by individuals or groups may be included in the record of today’s hearing. Without objection, so ordered.

Once again, I can’t thank you enough for coming here today. As

I said, as we go through this process, it is imperative that we have

people from outside the Beltway giving us their input, because you

folks are going to be the ones impacted the most by a change in

what we do here in Washington. So, again, thank you very much.

The hearing is adjourned.

[Whereupon, at 4:37 p.m., the subcommittee was adjourned.]
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Æ